Foreign airlines to repatriate N120bn ticket sales proceed

Over 25 foreign airlines operating in Nigeria are expected to complete the repatriation of over N120bn ($600m) ticket sales proceeds trapped in the country for several months owing to dollar shortages.

The Chief Executive Officer, Kenya Airways, Mr. Mbuvi Ngunze, said sub-Saharan Africa’s third-largest carrier was expecting to start receiving payments for outstanding fares from the Central Bank of Nigeria within a month.

The carrier has been unable to collect N5bn ($25m) from its sales agents in Nigeria, Angola and Sudan because of dollar shortages in the oil-producing countries.

“We should be able to start seeing a flow of cash” in July, Ngunze told Bloomberg in an interview in Nairobi, the Kenyan capital.

“Some of the airlines are beginning to get some money.”

Nigeria, which is grappling with the threat of recession, abandoned a 16-month currency peg on June 20 and sold $4bn in the spot and forwards markets that day to clear a backlog of demand for hard currency.

The Federal Government is considering proposals by the International Air Transport Association on how to reduce the balance of the money to be repatriated.

According to Ngunze, suggestions include payments in naira, while adding that Kenya Airways would accept local currency settlement in the three countries.

Kenya Airways is planning to cut 600 jobs after shrinking its fleet by almost a third to help reverse a 25.7 billion-shilling ($253.8m) loss in the year through March 2015.

The loss is projected to narrow this year and next as the company cuts costs and the nation’s tourism industry recovers, a Citi research analyst, Andrew Light, said in an e-mailed note.

The airline’s shares jumped by 14 per cent in June, the biggest monthly increase since January 2015, data compiled by Bloomberg showed.

The gains helped pare the stock’s loss to nine per cent so far this year.

While the company has reduced its operating losses, its full-year performance will be weighed down by higher interest repayments on loans and losses incurred from fuel-price hedges, Ngunze said.

“We have borrowed more as a business, so it means we are paying more for interest and the last part of the fuel hedges,” Ngunze said.

KQ, as the company is known, is reorganising its balance sheet with the help of investment bank PJT Partners Inc.

The company’s operation may start turning around from 2017, at which time the carrier may want to bring in a partner, according to a research analyst at Standard Investment Bank, Eric Musau.

The Kenyan government, which owns 29.8 per cent of the airline, is considering selling part of its stake to new or existing investors within two years, Nairobi-based broadcaster Citizen reported, citing Transport Secretary James Macharia.

“Anything is possible,” he said.

“There could be the possibility of new shareholders who bring a different value to the business coming in, in the future. It is still very early days. This is an interesting opportunity for us to make that assessment and that’s what we are doing,” he added.